National credit laws and book up: What you need to know
Book up is a common practice in many remote and regional communities of Australia. When you offer book up, or run up a tab, you allow your customers to buy goods or services and pay later. If you do this, you are providing a type of consumer credit. Depending on the way your store offers book up, it may be regulated by the National Consumer Credit Protection Act 2009 (National Credit Act) and you may need a credit licence to provide this service.
This page gives you advice to help work out whether the credit laws affect you and, if so, what you need to do.
- National Credit Act – Do I need to be licensed?
- Getting licensed
- Written records and responsible lending
- What if the National Credit Act does not apply to the book up you offer?
- ‘Consumer friendly’ book up
Store owners and other traders offering book up are likely to be affected by the National Credit Act if they charge consumers for the book up (credit). Charges might include interest or credit fees.
For example, the National Credit Act will generally apply if you allow customers to book up the cost of goods or services and:
the provision of credit exceeds 62 days and a charge is made for providing the credit, or
the provision of credit does not exceed 62 days but you charge a fee that exceeds 5% of the amount booked up, or charge interest at an annual percentage rate in excess of 24%.
If you offer book up (credit) that is regulated under the National Credit Act, you must be licensed to undertake such activity or be authorised as a representative of a licensee.
There are penalties under the National Credit Act for businesses that provide regulated credit without the appropriate licence or authorisation.
You can apply online for a credit licence.
If you offer book up (credit) that is regulated under the National Credit Act, you must give customers certain written records at specific times to ensure they are aware of the terms on which the book up is provided.
This includes written disclosure before the book up (credit) is provided as well as ongoing account statements.
The National Credit Act also has responsible lending provisions, which prohibit businesses from providing credit if the consumer would only be able to repay with substantial hardship.
Note: On 25 September 2020, the Government announced proposed reforms to the responsible lending obligations contained in Chapter 3 of the National Credit Act. The proposed reforms will amend the obligations that apply before entry into a credit product or the provision of credit assistance. ASIC’s guidance relating to the current responsible lending obligations will be reviewed and updated when the proposed reforms are finalised.
Case study: Book up for travel
A regional airline provides a book up service for customers who use air travel. It charges a 10% fee on the total book up amount and deducts payments every fortnight on the day the customer is paid, with the repayment period exceeding 62 days.
The National Credit Act applies to this book up service. The airline must have a credit licence, unless it is authorised as a representative of a credit licensee.
The airline must also provide customers with appropriate written records and comply with the responsible lending provisions.
Case study: Book up at a general store
A general store provides a book up service for customers allowing them to book-up bread, milk and other groceries. The store has a book up limit of $150 and customers are able to pay off the debt whenever they can afford it. The store charges $1 more than the cash price whenever an item is booked up.
As the debt may be deferred for a period of greater than 62 days, and a fee is charged for providing this service, the National Credit Act applies to this book up arrangement. The store must have a credit licence, unless it is authorised as a representative of a credit licensee.
The store must also provide customers with appropriate written records and comply with the responsible lending provisions of the National Credit Act.
If the National Credit Act does not apply to your book up arrangements (for example, because you don’t charge consumers for the service), you still need to be aware of other laws that apply.
One of these laws is the Australian Securities and Investments Commission Act 2001, which covers misleading conduct, unconscionable conduct and unfair contract terms.
Book up is not in itself an unfair practice. This type of short-term credit can help people who have run out of money.
However, unfair conduct can occur where agreements are not set out clearly for consumers to understand or where consumers are exploited.
Whether or not the new credit laws apply to your business, a ‘consumer friendly’ book up service:
- gives customers a written agreement that includes terms and conditions and any interest or charges that apply
- doesn’t ask for or keep customers’ PIN numbers (many banking agreements prohibit traders from asking for PINs or requiring them to be disclosed as part of a book up arrangement)
- displays a copy of book up terms and conditions in the shop so customers are fully aware of them
- gives customers receipts and an itemised statement (with dates and prices) of goods or services they have bought, including any fees and charges for the book up
- charges the same price for things regardless of whether they are paid for with cash or book up
- doesn’t require any customer to book up more than they will be able to pay back
- allows book up customers to look at their records at any time
- keeps records of purchases and money owing in a safe, confidential and secure place.
ASIC's publication 'Dealing with book up: Key facts' provides more information about best practice book up. You can access a copy of this publication from our Moneysmart website.
Know what laws apply
- The National Credit Act may apply to you if you offer book up, run a tab or allow your customers to buy goods or services and pay later.
- The National Credit Act may not apply to all book up arrangements, for example, if you offer book up to customers but do not charge any fees or interest.
- Either way, you still have to comply with other laws such as those relating to misleading conduct, unconscionable conduct and unfair contract terms. This includes ensuring that book up arrangements are set out clearly for consumers to understand.
- Contact ASIC for information or get legal advice to work out what laws apply to you.
Where can you find more information?
- Go to www.asic.gov.au/credit for more information about book up and the National Credit Act.
- Visit www.moneysmart.gov.au for information about credit, loans and borrowing.
- Call ASIC on 1300 300 630 or ask a question online.
Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. Omission of any matter on this information sheet will not relieve a company or its officers from any penalty incurred by failing to comply with the statutory obligations of the National Credit Act.
You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases your particular circumstances must be taken into account when determining how the law applies to you.
This is Information Sheet 129 (INFO 129), reissued November 2020.